Mr. John Wright reports

LIGHTSTREAM ANNOUNCES THIRD QUARTER RESULTS

Lightstream Resources Ltd. has released its third quarter financial and operating results and has provided an update on its Swan Hills program.

Third quarter financial and operating highlights:

• In the third quarter, the company exceeded its asset divestiture goals with the sale of the rest of its southeast Saskatchewan conventional business unit for gross proceeds of $476-million, resulting in total 2014 proceeds from non-core dispositions of $729-million.
• Year to date, the company has reduced its debt by $716-million through divestiture proceeds and excess cash flow, a 31-per-cent decrease from year-end 2013 levels.
• Including the impact of the company's non-core asset sales this year, third quarter production averaged 38,837 barrels of oil equivalent per day (78 per cent light oil and liquids), a 9-per-cent decrease from the second quarter of 2014.
• The company's operating netback for the third quarter was $48.67 per barrel of oil equivalent, an 11-per-cent decrease from the third quarter of 2013, mainly due to weaker commodity prices and slightly increased production costs.
• Funds flow from operations was $131-million (65 cents per basic share) for the quarter, representing a 27-per-cent decrease from the third quarter of 2013 as a result of lower production and weakened commodity prices.
• Capital expenditures before acquisitions and dispositions totalled $90-million in the third quarter, a 36-per-cent decrease from the same quarter a year ago and resulted in 18 wells drilled, eight wells brought on production and 14 wells in inventory at the end of the quarter.
• The company completed its Swan Hills area technical review and confirmed that this area remains a long-term growth platform for the company.

Operating results

The company's third quarter average production of 38,837 barrels of oil equivalent per day (78 per cent light oil and liquids) was composed of 17,699 boe per day from the Cardium business unit, 16,941 boe per day from the company's southeast Saskatchewan business units and 4,197 boe per day from the AB/BC business unit. The decrease in production compared with prior years is largely due to the asset disposition activity in 2014, representing a total of 6,315 boe per day, and reduced capital spending. The production impact of the dispositions in the third quarter was approximately 3,400 boe per day. Production expenses were $14.85 per boe in the third quarter, slightly higher in 2014 than in 2013 due to higher workover costs but lower than the company's internal estimates and guidance.

In the third quarter, capital expenditures before acquisitions and dispositions totalled $90-million. This is 36 per cent lower than the third quarter of the prior year due to a reduced capital program for 2014. During the quarter, the company drilled 18 wells, brought eight wells on production and had 14 wells left in inventory at the end of the quarter. To date in 2014, the company has drilled 69 wells and brought 62 wells on production. Capital activity will increase in the fourth quarter to take advantage of optimal drilling conditions. The company plans to drill 26 wells in the fourth quarter, representing approximately 27 per cent of the company's 2014 drilling program.

Southeast Saskatchewan business units update

Production in the southeast Saskatchewan business units averaged 16,941 boe per day in the quarter, representing a 19-per-cent decrease from the third quarter of 2013. The decline is due principally to a 57-per-cent-lower capital program resulting in significantly reduced drilling activity this year, as well as area asset dispositions totalling 1,315 boe per day for the quarter. During the third quarter, the company brought two wells on production with seven Bakken wells remaining in inventory.

Cardium business unit

Production in the Cardium during the third quarter averaged 17,699 boe per day, representing a 14-per-cent decrease from the third quarter of 2013. This decrease was driven by divestitures representing 1,200 boe per day of production, 35-per-cent-lower capital expenditures year over year, two non-operated Falher wells producing materially below their capacity and mechanical issues with five Cardium wells within the business unit. The Falher wells are presently flowing at much higher rates, and the company remediated three of the Cardium wells, improving production. Commencing in the third quarter, the company implemented minor enhancements under its drilling program to its completion techniques, which eliminate these mechanical issues. During the quarter, the company also invested in facilities and infrastructure to alleviate restrictions on solution gas volumes. In total, the company brought six wells on stream, leaving five wells in inventory as of Sept. 30, 2014.

Alberta/B.C. business unit

In the company's Alberta/B.C. business unit, third quarter production averaged 4,197 boe per day, which represents a 12-per-cent increase relative to the third quarter of 2013, despite the disposition of 500 boe per day during the first quarter of 2014 through asset sales. The increase is largely due to seven wells the company brought on stream in the Swan Hills during the second quarter when the company's new oil facility was commissioned.

Production from the seven new wells brought on stream during the second quarter did not meet the production performance expectations set by the company's 2012/2013 Swan Hills drilling program. As a result, the company suspended drilling in this play pending an internal review to understand performance differences. This review indicates production results from the company's recent wells were impacted by completion and floback practices rather than geological considerations. The delayed start-up of the battery, combined with equipment constraints, resulted in completion fluid being left in the wells for an extended period of time, creating formation damage and compromising production performance. These practices will be eliminated from the company's future development program in the area. With the confirmation of the company's geological and reservoir modelling, the Swan Hills continues to remain a long-term growth area. Due to recent impairments to third party gas infrastructure, drilling in the area is not expected to resume before the second half of 2015.

Financial results

In 2014, the company sold $729-million of non-core assets, $476-million of which were sold during the third quarter. The company used the proceeds from these dispositions to repay amounts outstanding under the credit facility, and the lending amount was reduced from $1.4-billion to $1.15-billion. In 2014, the company reduced the company's total debt by 31 per cent, and the company expects annual interest savings of at least $25-million. At Sept. 30, 2014, the company had approximately $660-million of available liquidity.

Funds flow from operations during the third quarter was $131-million (65 cents per basic share), which is 27 per cent lower than the third quarter of 2013 due to lower production levels and a decreased operating netback of $48.67 per boe.

The company's adjusted net income for the third quarter was $6.9-million (three cents per basic share) compared with $52-million in third quarter 2013. The decrease in net income compared with the same quarter in 2013 is primarily due to an unrealized foreign exchange loss compared with a previous gain, lower sales volumes and lower realized prices, partially offset by an unrealized gain on risk management contracts compared with a loss previously, a higher gain on asset dispositions, and lower depletion and depreciation.

The company's monthly dividend was four cents per share during the third quarter, which resulted in total dividends of $24-million, representing 19 per cent of funds flow from operations. For the first nine months of 2014, the company has achieved a sustainability ratio of 88 per cent (before divestiture proceeds), which is ahead of the company's plan and significantly improved over the 134-per-cent ratio for the prior-year period.

At the end of the third quarter, the company had $1.56-billion in total debt, including $489-million of debt drawn on the company's $1.15-billion secured termed credit facility, $856-million (U.S.) of senior unsecured notes and convertible debentures of $6.5-million (U.S.).

                              UPDATED GUIDANCE
             ($000s, except where noted and per-share amounts)    
                                                                     Revised
                                    Guidance for 2014      guidance for 2014
                                       (Sept. 2, 2014)        (Oct. 30, 2014)
Production (annual average)
Total (boe/d)                           40,000-42,000          40,000-41,000
Natural gas weighting                              22%                    22%
Exit production (boe/d)                 36,500-39,500          36,000-37,000
Funds flow from operations          $615,000-$645,000      $575,000-$595,000
Funds flow per share                      $3.08-$3.23            $2.88-$2.98
Declared dividends per share                    $0.48                  $0.48
Capital expenditures                $485,000-$535,000      $480,000-$500,000
Pricing assumptions
Crude oil -- WTI (U.S.$/bbl)                    95.00                  80.00
Crude oil -- WTI (Cdn$/bbl)                    105.55                  88.89
Corporate oil differential
(%)                                                10                     10
Natural gas -- AECO
(Cdn$/Mcf)                                       4.00                   4.00
Exchange rate (Cdn$/U.S.$)                       1.11                   1.11

On Sept. 2, 2014, the company updated its guidance to reflect dispositions to date. The company has completed $729-million of non-core asset dispositions in 2014, representing 6,315 boe per day, and used the proceeds to reduce debt.

To reflect actual results for the first nine months of the year, and the company's expectations for the fourth quarter, the company is reducing the upper range on full-year average guidance to 40,000 to 41,000 boe per day (78 per cent liquids). Bakken business unit production is performing ahead of the company's expectations; however, the company has slightly reduced the range on exit guidance to 36,000 to 37,000 boe per day due to minor program delays pushing on stream dates for four Cardium wells into 2015. As a result, the company has reduced full-year capital expenditure guidance to a range of $480-million to $500-million.

The company continually monitors the commodity pricing environment, and, given the recent decline in global commodity prices, the company is reducing its outlook for WTI for fourth quarter 2014 from $95 per barrel to $80 per barrel. The company now expects full-year funds flow to range from $575-million to $595-million. Using the midpoints of the company's revised funds flow and capital guidance, the company continues to expect a sustainability ratio of approximately 100 per cent for 2014.

Third quarter financial investor conference call

Management of Lightstream will be holding a conference call for investors, financial analysts, media and any interested persons on Oct. 31, 2014, at 9 a.m. (MST) (11 a.m. EST) to discuss the company's third quarter financial and operating results.

The investor conference call details are as follows:

Live call dial-in numbers:  1-416-340-8530/1-800-766-6630

Replay dial-in numbers:  1-905-694-9451/1-800-408-3053

Passcode:  5694926

          FINANCIAL AND OPERATING HIGHLIGHTS

                      Three months ended     Nine months ended
                              Sept. 30,           Sept. 30,
                           2014     2013        2014      2013
Financial ($000s,
except where noted)
Oil and natural gas
sales                  $269,177 $331,814    $920,963  $962,764
Funds flow from
operations              130,950  179,713     482,954   524,911
Per share
Basic ($)                  0.65     0.91        2.41      2.70
Diluted ($)                0.64     0.90        2.37      2.66
Adjusted net income
(loss)                    6,935   52,031      89,536     2,990
Per share
Basic ($)                  0.03     0.26        0.45      0.02
Diluted ($)                0.03     0.26        0.44      0.02
Dividends                24,370   47,876      73,019   142,216
Per share ($)              0.12     0.24        0.36      0.72
Payout ratio                 19%      27%         15%       27%
Cash dividends           24,370   32,189      73,019    99,832
Cash dividend payout
ratio                        19%      18%         15%       19%

Operations
Operating netback
($ per boe except
where
noted) 
Oil, NGL and natural
gas revenue              $74.84   $79.36      $80.32    $75.00
Royalties                 11.32    11.36       11.74     10.17
Production expenses       14.85    13.25       14.34     13.33
Operating netback         48.67    54.75       54.24     51.50
Average daily
production (boe/d)
Oil and NGL (bbl/d)      30,203   35,445      33,161    37,787
Natural gas (Mcf/d)      51,802   58,290      51,536    53,756
Total (boe/d)            38,837   45,160      41,750    46,746

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